Lawmakers propose increases to sales and lodging taxes as part of budget deal

AUGUSTA, Maine — Lawmakers propose to temporarily increase the sales tax by a half a percent and the meals and lodging tax by 1 percent in order to balance the state budget for the next two years and blunt some of the cuts proposed by Gov. Paul LePage.

The tax increases were supported early Friday morning by unanimous votes of the Legislature’s Appropriations Committee, which convened in public session at 5:30 a.m. after negotiating through the night. The $178 million in revenue generated by the tax increases, which are set to sunset in June 2015, will allow lawmakers to restore $125 million of the $200 million suspension of municipal revenue sharing proposed by Gov. Paul LePage and give raises to state employees who haven’t seen pay bumps in more than four years.

The committee’s decisions on Friday constitute recommendations to the full Legislature, which seeks to enact the budget prior to adjournment on June 19.

Committee members also opted to reverse LePage’s proposed cut of the homestead exemption program and replace the circuit breaker program with a “property tax fairness” exemption that will kick in automatically when people file their state taxes. Other programs for which funding was restored by the committee include the low-cost drugs to the elderly program; general assistance; Head Start; Women, Work and Community; and other job training programs.

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“These are programs that are very important to us and we were glad we were able to put some money into them to keep them strong,” said Rep. Peggy Rotundo, D-Lewiston, who co-chairs the committee.

The committee also approved spending more on public education to bring funding to the level it was in the current biennium before LePage cut $35.5 million from the overall budget late last year due to the slack economy. The additional education funding will be accomplished by reversing a proposal by LePage for municipalities to pay half the cost of teacher retirement plus adding $13 million in casino revenue to general purpose aid to education.

Sen. Emily Cain, D-Orono, moved language into the budget bill that requires the state to add 1 percent to the state’s share of essential programs and services in 2015. EPS is the formula that’s used to fund public schools. Cain said the initiative is meant to move the state toward funding 55 percent of the total cost of K-12 public education.

The committee also approved spending nearly $9 million over the biennium to restore longevity and merit pay for state employees.

“I think this goes a long way to acknowledging the challenges of recruitment and retention in the state workforce,” said Cain. “We recognize that it’s not everything but it is a step in the right direction.”

The budget compromise represents a victory for Democrats who were told by Republicans over the past few days that tax increases would not have their support, though it still must gain two-thirds support in both chambers of the Legislature to be enacted by July 1. LePage also could veto all or portions of the budget.

“I know this has been a very tough budget for all of us,” said Rep. Katherine Chase, R-Wells, who on Wednesday said her caucus would not support tax increases. “It’s painfully apparent that the economic woes haven’t really gone by the wayside, and we’re still in the midst of them. As a result we have to deal with cuts and some of them after this many years are no longer acceptable. … I would hope that the people of Maine would understand that you’re helping the elderly keep their drugs, helping the good employees of the state of Maine get recognition for their good work and giving funding back to the towns that we all come from so that property taxes won’t increase as much as they would have.”